If the prime minister is interested in taking a second crack at Rona Ambrose’s question, he would do well to call up Stephen Schwarzman.
Schwarzman, you may recall, is the CEO of the Blackstone Group, a Godzilla-sized private equity firm in New York with $100 billion (U.S.) in assets under management. He’s also economic adviser to Donald Trump through the president’s strategic and policy forum. In January, Schwarzman flew to Calgary, apparently to reassure Trudeau et al., about future U.S.-Canada economic relations.
Wearing his Blackstone hat, Schwarzman and his group sold their Strategic Hotels & Resorts Inc. to China’s Anbang Insurance Group last September, a reported $6.5-billion deal. Blackstone’s further discussions with Anbang have included the potential sale of Japanese apartment buildings and Dutch office holdings.
So perhaps Schwarzman’s due diligence could assist the prime minister the next time Trudeau is called upon to throw some light on Anbang, which has been given the government’s blessing to acquire Retirement Concepts, a Vancouver-based chain of retirement homes. For the purposes of this transaction, Anbang is using the corporate moniker Cedar Tree Investment Canada Inc.
Read more: Don’t let seniors’ care become a private equity money maker
As it was, when Ambrose asked the PM who, exactly, owns Anbang, Trudeau responded in boilerplate speak.
“Canada is a trading nation that relies on engagement with countries around the world to create good jobs in Canada and to create economic growth,” the PM offered, unhelpfully. “We have a policy that allows us to draw-in global investments to create jobs and opportunities for Canadians while at the same time ensuring that they are in Canadians’ interests, and to the benefit of our country as we move forward in a thoughtful and responsible way. That is exactly what we did in this case.”
The interim Conservative leader, undaunted, asked how many more of these deals the PM is going to make with China. In response, Trudeau said this: “The government continues to be open to investments that create middle class jobs, economic growth, and long-term prosperity for Canadians. Cedar Tree has confirmed a strong commitment to the ongoing quality of operations of Canadian retirement residences and to its health care workers.”
There’s a lot to unpack. And it’s important, both because of Trudeau’s pledge to reset the country’s relationship with China and his commitment to openness and transparency where foreign investment is concerned.
On the latter point, approval of the takeover under the Investment Canada Act offers the public nothing by way of disclosure. This deal is thick with fog in regards to the “net benefit” to Canada. We shouldn’t have to go begging to Ottawa to understand what promises and pledges have been made to meet what has, since its inception in 1985, been an inadequate test. Disclosure should be automatic and specific.
When queried, Innovation, Science and Economic Development Canada offers up a few general statements. The acquirer pledges to maintain the current levels of full-time and part-time employees, though wage retention is not mentioned. This is interesting: Anbang must “maintain a significant level of unleveraged equity here in Canada.”
How the government is going to benchmark this “significant level” is unknown.
What it telegraphs is that the Liberals are alert to the red flags that have been waving over Anbang regarding risk concerns. In September 2015, Anbang, through Maple Tree (Freehold) Inc., purchased the HSBC building at 70 York St. for $110 million. The directors of Maple Tree cross reference to the directors of Maple Red Financial Management Canada Inc., Maple Red being the acquiring name Anbang used to purchase Vancouver’s Bentall Centre. Searching the disclosure required under the Canada Business Corporations Act is about as useful as that of the Investment Canada Act. Which is to say, not. Presumably the government of the day is aware of the full scope of the Anbang real estate empire in Canada and how leveraged it is?
What we do know is that in a scant dozen years Anbang has come from nowhere to build a conglomerate that reaches beyond insurance (personal, property, casualty) into asset management, finance, leasing and more. China Daily reports that the company was founded in 2004 by a group of state-owned companies, including Shanghai Automotive Industry Group and Sinopec Group (China Petrochemical Corp.) The company came sharply to the attention of American business media when it purchased the Waldorf Astoria hotel in New York for $1.95 billion in October 2014. The move into hospitality, including the deal with Blackstone, seemed sudden and surprising for an insurance company. Anbang appears to have no investments in retirement care prior to its bid for Retirement Concepts.
The public face of Anbang is chairman and CEO Wu Xiaohui, who was married to Deng Xiaoping’s granddaughter. Two years ago, a south China weekly apologized for suggesting that the growth of the company was spurred by political connections, including a tie to Chen Xiaolu, son of one of the founders of the People’s Republic of China. Chen told a financial news outlet that while he is a long time business partner of Wu’s, he is only a consultant to Anbang and owns no shares.
Who does? It isn’t just the corporate construction of Anbang that’s opaque. It’s the Canadian system. And here we thought Justin Trudeau was going to let the sunshine in.
jenwells@thestar.ca
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